OPINION: PRESTON Rowe Paterson have released a paper which addresses dealing with the role out of the Commonwealth’s Code on Commercial leasing in the States and Territories during:
- The COVID-19 Pandemic Period;
- The Reasonable Recovery Period (undefined); and
- Any Rental Waiver and Deferral Period beyond 1 and 2 above if applicable;
Greg Preston, the author of the paper, commented, “It is already proving to be a challenge for both entities owning and managing investment real estate assets in multiple State and Territory jurisdiction’s, not to mention SME franchise tenants leasing space in all States and Territories.”
“The Code’s fundamental principles should be “keeping SME tenants connected with their landlord/ building and in occupancy with their tenancy” he said.
“Anecdotal evidence is also suggesting that tenants outside the Code SME eligibility principles are seeking similar relief in direct negotiations with landlords.”
Key Issues to Note/ Consider Given the different roll out of the Code in the States and Territories
- The Code has been ratified in different ways;
- Some have new Legislation – others have amended existing Legislation;
- Some have only issued regulations;
- Some have adopted different Lessee eligibility principles;
- Most have adopted different definitions and terminology;
- Some have adopted different start and end dates for the COVID-19 Period and, in some case the Reasonable Recovery Period;
- Some have been more prescriptive than others re the Code;
- The extent to which the actual relief principles in the Code have been referred varies; and
- The application of the Waiver and Deferral Principles vary greatly.
What do We Need to Know to Apply the Code?
- What Legislation applies in my Jurisdiction?
- Have Regulations issued?;
- What are the relevant provisions of the Code that apply to my jurisdiction’s circumstances?
- Which Sections of the relevant Act and Regulations need to be considered?
- Does the Code need to be applied prescriptively in the relevant State or can a Landlord and Tenant negotiate based on the principles of the Code, but outside the Code?
- Is the SME tenant eligible for to apply the Code;
- What information does the Tenant have to supply the Landlord to justify eligibility in my jurisdiction?
- What is the amount of any negotiated Waiver and / or Deferral and what are the negotiated start and end dates of the waiver and deferral?
- Does the Tenant have to extend the lease term certain to cover a) the COVID-19 Pandemic Period; b) the Reasonable Recovery Period; and c) any waiver and deferral period; if a lease expires at any point in time during these periods?
“It will be a significant problem if waivers and deferrals exceed lease terms”, Greg Preston commented. “Wishful thinking would have the Code amended to require, as mandatory, that lease term certain be extended beyond any waiver and deferral periods to ensure that SME tenants remain connected with their landlords and building”, he said.
To answer these relevant questions, Landlords and tenants need to review their jurisdiction’s Legislation and Regulations.
The Preston Rowe Paterson paper can be found at https://prp.com.au/covid-19-2-2/
By Greg Preston, MD of Capital & Investment Markets, Preston Rowe Paterson.*
